Thousands fear the meltdown

CHRISTINE and John Slade have devoted the past 15 years of their lives to their off-licence business. They say that keeping it going has often been a struggle and has meant making plenty of sacrifices.

The only thing that has kept them going during the long hours at work has been the expectation of a comfortable retirement when their endowment matures in 2013.

Unfortunately, the financial future for the Slades is much bleaker than the one that was painted when they took out their Legal & General with-profits endowment policy in 1987. The Slades are now likely to face a shortfall, which means that they will have to find money from somewhere else to make up the gap between the value of their endowment and the £20,000 mortgage it was meant to at least cover.

And this means that 53-year-old Christine and John, 58, can forget the holiday abroad that they have dreamed about during the tough years of work.

The Slades, who live in St George, east Bristol, are not alone. Between six and seven million homeowners have endowments that will not clear their mortgages - that is more than three out of every four policies sold.

About three million of these borrowers, like the Slades, have endowments with ten years or under to go before they mature. And judging by the initial findings of our reader survey into endowment shortfalls, most have yet to take action, such as rearranging their mortgages or making extra savings.

The Slades are just two of thousands of people who, in the past couple of weeks, have responded to Financial Mail's Stop The Endowment Meltdown campaign by completing the questionnaire printed opposite. Armed with information from our survey, we intend to press insurers and regulators for solutions to the curse of endowment shortfalls.

As far as the Slades are concerned, they are caught in a trap. The adviser firm that sold them the with-profits policy 15 years ago has long gone out of business, so they are unable to pursue a claim for compensation.

The policy was also sold before the introduction of the Financial Services Act in 1988, which means they fall outside the compensation process. 'When we were sold the policy, we were assured that when it matured we would have a nice little nest-egg', says Christine. 'We would never have gone for the endowment alternative had we considered there to be any possibility of our mortgage not being paid off.'

The latest correspondence from Legal & General, received last November, indicates that if their policy grows by four% a year between now and 2013, they will be faced with a £3,000 shortfall.

'We have never been in a position to save', says Christine, 'apart from a small private pension which John has assembled. We have struggled to hang on to our business and home. We now feel badly let down and extremely worried about the future.

'We're just hoping that when the time comes to sell our business, we will make enough to pay off our mortgage.'